-4-
received $99,990 therefor.1
In 1984, Mr. Yei acquired a controlling interest in Cirtex, a
circuit board manufacturer located in Santa Clara, California, and
became its president. Mrs. Yei maintained the company's books and
records. Cirtex had approximately 80 employees in the mid-1980's,
but that number fell to less than 10 by 1989 because of financial
difficulties. The company's problems, including environmental
contamination at the company's manufacturing plant, brought about
several lawsuits. Cirtex was dissolved on May 22, 1992.
We note that for all of the issues, petitioners have the
burden of proving error in respondent's determinations. Rule
142(a); Welch v. Helvering, 290 U.S. 111 (1933). Moreover,
deductions are a matter of legislative grace, and petitioners bear
the burden of proving they are entitled to any deductions claimed.
See INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992).
Issue 1. Stock Sale
Pursuant to a written agreement dated December 9, 1989, Mr.
Yei surrendered (for cancellation) 60,000 shares of Cirtex stock to
Cirtex. He received no money in connection with this transaction.
According to the December 9, 1989, agreement, Mr. Yei surrendered
1 Although the record is far from clear with respect to
this matter, it appears that from the time Mr. Yei acquired the
10,000 shares of Solectron stock in 1979 to the date he tendered
his stock to Solectron, there had been a 3 for 1 stock split or
dividend and a subsequent 2 for 3 reverse (downward) stock split.
Hence, we believe that in 1989, Mr. Yei owned 19,998 shares of
Solectron stock all of which he tendered to the Company at $5 a
share (the tender price).
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